EY Human Capital Conference 2012: International social security - the essential guide

2012 Human Capital Conference23–26 October

International social security:th ti l idthe essential guide

Disclaimer

► Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited located in the US.

► This presentation is ©2012 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical,distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP Any reproduction transmission orpermission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or itsdisclaims any liability in connection with use of this presentation or its contents by any third party.

► The views expressed by panelists in this session are not necessarily those of Ernst & Young LLP

International social security: the essential guidePage 2

those of Ernst & Young LLP.

Panelists

► Mike Kenyon ► Koyla Hachey► Ernst & Young LLP (UK)

y► General Electric

► Gary Chandler► Ernst & Young LLP (UK)


Agenda

► Interactive discussion in relation to some of the practical current social security-related issues facing employers with an internationally mobile workforce


Areas for discussion

► Recent country changes and areas of focus from an l tiemployer perspective:

► India► China► China► European Union

► Long-term expats — the options from a social security► Long term expats the options from a social security perspective

► Optimization planning — reducing ongoing social security p p g g g g ycosts within a global mobility program


India

India

Totalization network SignedIn force (effective date):► Belgium (1 September 2009)

g(date signed):► Hungary (3 February 2010)g ( p )

► Germany (1 October 2009)► Switzerland (29 January 2011)

g y ( y )► Czech Republic (8 June 2010)► Norway (29 October 2010)

► Denmark (1 May 2011)► Luxembourg (1 June 2011)► France (1 July 2011)

► Finland (12 June 2012)

► France (1 July 2011)► South Korea (1 November 2011)► Netherlands (1 December 2011)

Further totalizations being negotiated:Austria Australia Bulgaria Canada Cyprus Greece Italy Sweden and US


Austria, Australia, Bulgaria, Canada, Cyprus, Greece, Italy, Sweden and US

India

► International worker status:► Updated FAQs on 25 May 2012► Further clarifications required

Discussion points: ► What are companies doing with regard to certificate of► What are companies doing with regard to certificate of

coverage applications for Indian outbound employees post this change?post this change?

► What is the recommended current position/action?


India

► Indian totalizations highlight another common compliance g g p“challenge” for employers in that the exemption in the host location under an Indian certificate of coverage is only a “partial” exemption.

Discussion point:Discussion point:► What are companies doing with regard to these partial

exemptions?exemptions?


China

China

► New social security lawy► Foreign nationals working in China subject to People’s

Republic of China (PRC) social security systemp ( ) y y► Interim measures effective from 15 October 2011► Issues to consider:

► Retroactive contributions► Late payment surcharge after 1 January 2012 (0.05% per day)► Different interpretation between local governments► Partial refund of payments upon departure (process optimization)


China

Location Date Title Effective date

Xiamen 5 March 2012 Notice on the imposition of social security on foreign 6 October 2011p y gnationals working in China issued by Xiamen

Qingdao 4 November 2011 Notice on the imposition of social security on foreign nationals working in China issued by Qingdao

15 October 2011

Chengdu 19 October 2011 Notice on the imposition of social security on foreign 15 October 2011Chengdu 19 October 2011 Notice on the imposition of social security on foreign nationals (including individuals from Hong Kong, Macau and Taiwan) working in China issued by Chengdu

15 October 2011

Beijing 11 October 2011 Guidance on the imposition of social security on 15 October 2011Beijing 11 October 2011 Guidance on the imposition of social security on foreign nationals working in China issued by Beijing

15 October 2011

Suzhou 18 January 2012 Notice on the imposition of social security on foreign nationals working in China issued by Suzhou

October 2011

Zhuhai 11 October 2011 Notice on the imposition of social security on foreign nationals working in China issued by Zhuhai

1 November 2011

Shanghai – No local variation from rules –

Shenzhen No local variation from rulesShenzhen – No local variation from rules –

Guangzhou – No local variation from rules –

Tianjin – No local variation from rules –

F h N l l i ti f l


Fuzhou – No local variation from rules –

China

Discussion point: ► What are companies currently doing in China in relation p y g

to social security liabilities?


European Union (EU)

EU: revised territorial coverage of the new regulationregulation

Austria Hungary Norway*

Belgium Iceland* Poland

Bulgaria Ireland Portugal g g

Czech Republic Italy Slovak Republic

Cyprus Latvia RomaniaCyprus Latvia Romania

Denmark Liechtenstein* Slovenia

Estonia Lithuania SpainEstonia Lithuania Spain

Finland Luxembourg Sweden

France Malta Switzerland*France Malta Switzerland*

Germany Netherlands UK

G


Greece

EU: revised territorial coverage of the new regulationregulation

► Switzerland adoption of the new rules (Regulation (EC) p ( g ( )No. 883/2004): with effect from 1 April 2012

► Norway, Liechtenstein and Iceland adoption of new y plegislation: from 1 June 2012

► Issues to consider:► Transitional provisions — E101 or A1?► Challenges in relation to treatment of cross-border third-country

nationalsnationals► Increased focus on employer obligations in relation to multistate

workers


EU

Discussion point:► What practical steps are companies taking in relation to

the increased focus on multistate workers?


Long-term expats

Long-term expats

► Most totalization agreements will have a maximum period g pfor which exemption can be obtained in the host location.

► If the individual stays beyond that period, he or she will y y ptypically fall out of the home social scheme into the host scheme.


Long-term expats

Discussion points:Discussion points: ► What does company policy say about “switching” social

tax schemes?tax schemes?► Do companies notify the employee about possible impact

on benefits?o be e s► What are company policies in relation to social security

equalization and/or payment of voluntary contributions?q p y y► What challenges do companies face with regard to

ensuring correct withholding?


Social security optimization

Optimization planning

► Process optimization: ► Policy optimization:p► Ensuring fully efficient end-

to-end processes/platforms are in place so that domestic

y p► Flexing the traditional home-

country policy for certain two-country corridors whereare in place so that domestic

exemptions and/or refunds are effectively identified and

country corridors where significant cost savings can be realized without significant

implemented impact on the employee or his or her dependants



Process optimization examples:► Exemptions:► Exemptions:

► UK► France► Belgium► Argentina

► Refunds:► Refunds:► Brazil► China

G► Germany► Switzerland

► Outbound population:p p► France► UK



Discussion point:Discussion point:► What are companies’ current thoughts on such

opportunities and have these changed in light of theopportunities, and have these changed in light of the current global economic downturn?


Conclusion

► Increasing speed of change in social security legislation ill ti t id h ll i l ti t bilitwill continue to provide challenges in relation to mobility

programs — from risk and cost perspectives.► Various strategies exist to minimize ongoing social► Various strategies exist to minimize ongoing social

security costs — from process and policy perspectives.► Ability to provide substantial program savings while► Ability to provide substantial program savings while

protecting against any individual employee loss.


Questions


Business

EY Human Capital Conference 2012: International social security - the essential guide